Mumbai, June 10: Taking a strong note of State Bank of India's huge profit erosion for March quarter due to higher provisions, accounting regulator ICAI today said it will send a letter asking the country's largest lender to explain the reasons for higher provisions for bad loans.
“We have decided to send a letter to SBI to enquire about the reasons which led to an increase in provisions, to explain a rise in provisions in the March quarter over that in December (2010) quarter,” The Institute of Chartered Accountants of India's (ICAI) President, G Ramaswamy, told reporters here.
The letter seeking explanation from SBI will be sent within a week and further action on the issue will depend on SBI's response, Ramaswamy said.
The ICAI will also be writing to banking watchdog Reserve Bank and capital market regulator Sebi with regard to the issue, he added.
Such a move by ICAI will only compound the worries of the nation's largest lender as RBI Deputy Governor K C Chakrabarty had also recently questioned the practice of banks reporting fall in profits after a change of guard.
SBI's Q4 profits plunged by nearly 99 per cent to Rs 20.88-crore for the quarter ended March 31, 2011 versus Rs 1,866.60-crore it had posted for the same period last year. One of the major denting factors was a 82 per cent jump in its total provisioning which increased to Rs 6,059-crore.
The results—the first to be announced by the bank's newly-appointed Chairman Pratip Chaudhuri—led to a sharp fall in the SBI scrip on the bourses.
Since the announcement, Chaudhuri has assuaged investor unease, saying the bank's profit will come back to normal in the quarters ahead.
Ramaswamy said, if required, the ICAI will also seek data from SBI's auditors and summon them with regard to the matter and added that the sector regulator “RBI should appoint auditors for banks.”
The ICAI took up the SBI provisions issue when one of the council members brought up the issue at its executive council meet, he said.
When asked about the Satyam case, Ramaswamy said ICAI expects to complete its inquiry in the next three months. The ICAI has also decided to establish a study group to go into allegations of black money stashed abroad and help the Government which is investigating the issue separately. PTI